The Fed originated from a private agreement of the world’s richest bankers in 1910. Reacting to clamors to regulate the “money trust”, leaders of the world’s banking systems came together to create the plan for the Fed, that Congress enacted in 1913.
The plan did not completely turn over the power of the world’s banking system to Congress. It instead created a “partnership” intended to retain power while sharing oversight with Congress. The President recommends and Congress confirms 7 board members to the Fed from banks, and the banks appoint 5 other members from regional Fed banks that are in turn owned by private banks to the FOMC that makes Fed actionable decisions.
The Fed is subject to oversight by Congress. Yet oversight means that the Fed reports a summary of its actions after the fact. Congress cannot dictate to the Fed, and can only change its charter by statute, which has been politically unachievable, even though a bill to end the Fed has 55 congressional signatures. Members of congress cannot attend Fed meetings and cannot audit the Fed. Thus, the Fed has authorization by our government to manage the banking system free from political controls.
Even so, congress has little incentive to place restrictions on the Fed. For every dollar that Congress spends, Congress borrows 40 cents from the Fed, who essentially just has it printed. And Congress needs the banks to get re-elected. 94% of congress persons with the most election funds win their elections. 90% of election funds are given by wealthy individuals, large corporations and the banks.
It is claimed by some “conspiratorialists” that through complex stock ownership in five U.S. banks, the original stockholders of the Fed still maintain control of Fed actions. Whether or not this is true, the actions of the Fed have resulted in great wealth transfer to bank shareholders through Fed actions including engineering inflation. In the 300 years before the Fed, inflation was minimal except for the absorption of wars. In the 97 years since the Fed, inflation has increased 1,900 percent.
When banking investments soured in 2008, many claimed that the Fed acted in the best interests of its shareholder banks over those of the United States. With the great recession, the Fed entered into unprecedented activities. In March 2008, the New York Fed advanced funds for JPMorgan Chase Bank to buy investment bank Bear Stearns. Also, in September of 2008, the Fed gave an $85 billion loan to AIG for a nearly 80% stake in the mega-insurer. In October, 2008, the Fed acquired the ability to pay interest to its member banks on the reserves the banks maintain at the Fed. And quantitative easing has the potential to inflate the U.S. out of losing housing portfolios.
In essence The Fed’s actions have protected the wealth of international investors at the expense of small investors that are nearing retirement with life savings in fixed incomes. By preserving this wealth, the Fed is also enabling the funding of third world multinational corporation direct foreign investment without consequence.